1099 vs W-2: What's the Difference?
How each form affects your taxes, benefits, and rights as a worker.
By Reba Donaldson · Last reviewed: April 2026
The core difference
A W-2 means you're an employee. Your employer withholds income taxes, Social Security, and Medicare from your paycheck and handles half your FICA taxes on your behalf. At year end, you get a W-2 showing what you earned and what was withheld.
A 1099 means you're an independent contractor or self-employed. No taxes are withheld. You receive the full payment amount and are responsible for calculating and paying all taxes yourself — including self-employment tax, which covers both the employee and employer share of FICA.
| W-2 Employee | 1099 Contractor | |
|---|---|---|
| Tax withholding | Yes — employer withholds | No — you pay yourself |
| Self-employment tax | Half paid by employer | You pay full 15.3% |
| Quarterly payments | Usually not needed | Required if owe $1,000+ |
| Business deductions | Very limited | Extensive — Schedule C |
| Benefits | Often provided | Not provided |
| Unemployment insurance | Eligible | Not eligible |
| Year-end form | W-2 | 1099-NEC |
The tax difference in dollars
This is significant. If you earn $60,000 as a W-2 employee, your employer pays $4,590 in FICA taxes on your behalf — you never see it. If you earn $60,000 on a 1099, you pay that $4,590 yourself (plus your own share), totaling around $8,478 in self-employment tax alone before income tax.
This is why 1099 workers often need to charge higher rates than employees doing equivalent work — to account for taxes, benefits, and the absence of employer contributions.
The deduction advantage
The silver lining for 1099 workers: you can deduct legitimate business expenses on Schedule C, reducing your taxable income (and self-employment tax base) significantly. Home office, equipment, software, health insurance premiums, retirement contributions, and mileage are all potentially deductible. Use our deductions checklist to see what applies to you.
What if you have both W-2 and 1099 income?
Common situation. Your W-2 withholding covers your employee income — but you'll still owe income tax and self-employment tax on your 1099 earnings. Either increase your W-4 withholding at your day job (enter 1099 income in Step 4(a)) or make quarterly estimated payments. See our combined income guide for the full walkthrough.